Financial Data
Updated 24 Jul 2017


3 Disruptions on the horizon for South Africa’s real estate sector

The property industry is reshaping and if you stick to the traditional ways of doing business, you could be disrupted. 


Nicole Crampton, 30 June 2017  Share  0 comments  Print


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“Change is inevitable. Progress is optional,” says Tony Robbins. With disruptions looming over the commercial real estate sector, change will happen with or without you, but to make progress you’ll need to get involved. This is why the 2017 South African Property Owners Association Annual Convention & Property Exhibition is focusing on disruption this year.

“Disruption will underpin the need for changes in the way we think and use technology in reshaping the property industry. It’s all about collaboration and cooperation of individuals from a wide range of professional backgrounds,” says David Green SAPOA Convention committee chair.

Related: 4 Questions you need answers to before buying commercial property


THE NEWS

“There are many strategic ways of dealing with technology disruption. Commercial real estate and private property are most likely to respond, firstly, by investing in disruptive technologies or the acquisition of these companies. Secondly, by launching products or solutions which directly compete with disruptors or, thirdly, by exiting from the market altogether by selling out while value still exists,” says Dr Paul Marsden, a psychologist specialising in trends and technology.


Disruption in any industry is inevitable, but real estate is about to be disrupted in the following three ways:

1. Introducing; digital channels

Access to the internet, social media and digital platforms allow commercial property buyers and sellers to communicate directly with one another, bypassing agents or brokers. "The older generation quite often buck the trend and often still buy and sell property entirely with the advice of and through their estate agent or broker. The vast majority of potential tenants and buyers now do a preliminary investigation via the digital media," says SA Commercial Prop News Media Director, Ortneil Kutama.

This will leave you out in the cold if you’re relying on traditional methods to attract potential tenants or buyers. Keep in mind that if you’re trying to buy a property, you’re limiting your options, which could make you uncompetitive.

“Developments in Cloud computing combined with mobile and social media are resulting in cost-effective and real-time availability of property information and are enabling many leasing activities online. This has reduced entry barriers for niche and smaller companies,” according to Deloitte’s report: Commercial Real Estate Industry Outlook - A nexus of technology advancements and consumer behaviour changes.

2. Up next; the collaborative economy

Crowdfunding websites have grown in popularity, including in South African commercial real estate. These sites “will likely create opportunities to optimise rates on short-term space, creating more value while allowing tenants to obtain space that more closely meets their demand-based needs,” says Deloitte.

Crowdfunding will grow quickly because of the flexibility and customisation it offers. You will find it challenging to manage the use of existing real estate under current leasing and tenant approaches, because you may not have the flexibility to accommodate tenants’ varying demand for, and use of space, according to Deloitte.

Related: Leading SA CFOs on commercial property and its impact on business

3. For the finale; the end of agents?

Technology is connecting tenants and property owners directly, without the need for a middleman. Being able to connect instantly can offer you a cost-effective way to gain property information and support fast, digital transactions.

Deloitte predicts that “a Google or Uber-like entrant will completely disintermediate the property brokerage business.” This could be a potential challenge for you; however, it will also put you in contact with smaller, niche companies, which can offer you a varied selection. 


KEY TAKEAWAYS

  • Access to digital platforms allows commercial property buyers and sellers to communicate directly with one another, bypassing agents or brokers.
  • Crowdfunding is changing the dynamic of SA’s real estate industry, allowing for a more flexible, customisable offering.
  • Technology is connecting tenants and property owners directly, without the need for a middleman, ending the need for the agents’ model.
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Nicole Crampton


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